To maximize their effectiveness, color cases should be printed in color.On July 28, 2002, Bertelsmann announced the firing of its CEO, Thomas Middelhoff, in a move that surprised industry observers, analysts, and many employees. Bertelsmann, a privately held company headquartered in Germany, was one of the largest global media conglomerates, with businesses spanning book publishing, printing, music, and television. Between 1998 and 2002, Middelhoff had initiated a series of strategic initiatives aimed at fostering greater integration among its diverse business units and strengthening their competitive positions, articulated a series of guidelines that would reevaluate Bertelsmann's portfolio mix, and looked to prepare Bertelsmann for a transition to a planned initial public offering in 2005. This case describes these initiatives in detail and the decision of the supervisory board to effect a change in leadership. The new CEO, Gunter Thielen, had to decide whether to effect a fundamental shift in the company's corporate strategy or a more modest reinterpretation of the course charted by Middelhoff. Includes color exhibits.
Swot Analysis of "Bertelsmann AG" written by Bharat N. Anand, Michael G. Rukstad includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Bertelsmann Middelhoff facing as an external strategic factors. Some of the topics covered in Bertelsmann AG case study are - Strategic Management Strategies, Collaboration, Corporate communications, IPO, Leadership, Professional transitions, Strategy execution and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Bertelsmann AG casestudy better are - – increasing commodity prices, increasing government debt because of Covid-19 spendings, cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, geopolitical disruptions, banking and financial system is disrupted by Bitcoin and other crypto currencies, central banks are concerned over increasing inflation,
technology disruption, increasing energy prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Bertelsmann AG case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Bertelsmann Middelhoff, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Bertelsmann Middelhoff operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Bertelsmann AG can be done for the following purposes –
1. Strategic planning using facts provided in Bertelsmann AG case study
2. Improving business portfolio management of Bertelsmann Middelhoff
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Bertelsmann Middelhoff
Strengths Bertelsmann AG | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Bertelsmann Middelhoff in Bertelsmann AG Harvard Business Review case study are -
Successful track record of launching new products
– Bertelsmann Middelhoff has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Bertelsmann Middelhoff has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Superior customer experience
– The customer experience strategy of Bertelsmann Middelhoff in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Highly skilled collaborators
– Bertelsmann Middelhoff has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Bertelsmann AG HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– Bertelsmann Middelhoff is one of the leading recruiters in the industry. Managers in the Bertelsmann AG are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Learning organization
- Bertelsmann Middelhoff is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Bertelsmann Middelhoff is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Bertelsmann AG Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Strong track record of project management
– Bertelsmann Middelhoff is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High switching costs
– The high switching costs that Bertelsmann Middelhoff has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Ability to lead change in Strategy & Execution field
– Bertelsmann Middelhoff is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Bertelsmann Middelhoff in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– Bertelsmann Middelhoff has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Bertelsmann AG Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Diverse revenue streams
– Bertelsmann Middelhoff is present in almost all the verticals within the industry. This has provided firm in Bertelsmann AG case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Effective Research and Development (R&D)
– Bertelsmann Middelhoff has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Bertelsmann AG - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Innovation driven organization
– Bertelsmann Middelhoff is one of the most innovative firm in sector. Manager in Bertelsmann AG Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses Bertelsmann AG | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Bertelsmann AG are -
Interest costs
– Compare to the competition, Bertelsmann Middelhoff has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High bargaining power of channel partners
– Because of the regulatory requirements, Bharat N. Anand, Michael G. Rukstad suggests that, Bertelsmann Middelhoff is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
No frontier risks strategy
– After analyzing the HBR case study Bertelsmann AG, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Skills based hiring
– The stress on hiring functional specialists at Bertelsmann Middelhoff has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Bertelsmann AG, in the dynamic environment Bertelsmann Middelhoff has struggled to respond to the nimble upstart competition. Bertelsmann Middelhoff has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Low market penetration in new markets
– Outside its home market of Bertelsmann Middelhoff, firm in the HBR case study Bertelsmann AG needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Increasing silos among functional specialists
– The organizational structure of Bertelsmann Middelhoff is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Bertelsmann Middelhoff needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Bertelsmann Middelhoff to focus more on services rather than just following the product oriented approach.
High operating costs
– Compare to the competitors, firm in the HBR case study Bertelsmann AG has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Bertelsmann Middelhoff 's lucrative customers.
Aligning sales with marketing
– It come across in the case study Bertelsmann AG that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Bertelsmann AG can leverage the sales team experience to cultivate customer relationships as Bertelsmann Middelhoff is planning to shift buying processes online.
Workers concerns about automation
– As automation is fast increasing in the segment, Bertelsmann Middelhoff needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Need for greater diversity
– Bertelsmann Middelhoff has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Opportunities Bertelsmann AG | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Bertelsmann AG are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Bertelsmann Middelhoff is facing challenges because of the dominance of functional experts in the organization. Bertelsmann AG case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Developing new processes and practices
– Bertelsmann Middelhoff can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Learning at scale
– Online learning technologies has now opened space for Bertelsmann Middelhoff to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Bertelsmann Middelhoff in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Bertelsmann Middelhoff can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Bertelsmann Middelhoff can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Bertelsmann AG, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Bertelsmann Middelhoff to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Leveraging digital technologies
– Bertelsmann Middelhoff can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Bertelsmann Middelhoff can use these opportunities to build new business models that can help the communities that Bertelsmann Middelhoff operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Manufacturing automation
– Bertelsmann Middelhoff can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Low interest rates
– Even though inflation is raising its head in most developed economies, Bertelsmann Middelhoff can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Creating value in data economy
– The success of analytics program of Bertelsmann Middelhoff has opened avenues for new revenue streams for the organization in the industry. This can help Bertelsmann Middelhoff to build a more holistic ecosystem as suggested in the Bertelsmann AG case study. Bertelsmann Middelhoff can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Buying journey improvements
– Bertelsmann Middelhoff can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Bertelsmann AG suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Threats Bertelsmann AG External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Bertelsmann AG are -
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Bertelsmann Middelhoff will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Stagnating economy with rate increase
– Bertelsmann Middelhoff can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Shortening product life cycle
– it is one of the major threat that Bertelsmann Middelhoff is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– Bertelsmann Middelhoff high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Bertelsmann Middelhoff needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Environmental challenges
– Bertelsmann Middelhoff needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Bertelsmann Middelhoff can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Bertelsmann Middelhoff in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Consumer confidence and its impact on Bertelsmann Middelhoff demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Bertelsmann Middelhoff in the Strategy & Execution sector and impact the bottomline of the organization.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Bertelsmann Middelhoff.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Bertelsmann AG, Bertelsmann Middelhoff may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Technology acceleration in Forth Industrial Revolution
– Bertelsmann Middelhoff has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Bertelsmann Middelhoff needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Bertelsmann Middelhoff can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Bertelsmann AG .
Weighted SWOT Analysis of Bertelsmann AG Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Bertelsmann AG needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Bertelsmann AG is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Bertelsmann AG is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Bertelsmann AG is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Bertelsmann Middelhoff needs to make to build a sustainable competitive advantage.
